U.S. energy boom proposed as Ukraine bargaining tool

Mar. 10, 2014
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The logo of Russian state-controlled natural gas giant Gazprom is shown in front of Russia's Government headquarters in Moscow on July 1, 2006. Gazprom warned Ukraine on February 7, 2014, that it could cut off gas exports if the new authorities in Kiev did not pay a bill for debt that now stands at $1.89 billion. / ALEXANDER NEMENOV, AFP/Getty Images

by Wendy Koch, USA TODAY

by Wendy Koch, USA TODAY

The U.S. energy boom continues to expand with record-setting natural gas production and petroleum product exports, prompting debate about its use as political leverage over countries like Russia.

Several members of Congress say the Obama administration can use U.S. natural gas exports to weaken Russian President Vladimir Putin's hold over Ukraine and the rest of Europe. They say U.S. exports could offset potential cutbacks by Russia, a dominant supplier of natural gas that has cut off supplies in prior disputes with neighboring Ukraine.

Sen. Mark Udall, D-Colo., and Rep. Ted Poe, R-Texas, proposed bills last week to facilitate the beginning of U.S. natural gas exports. "The demand is there, and the American supply is overwhelming," Poe said in describing his bill to speed up exports to Ukraine and other members of the former Soviet Union.

"We should not force our allies to remain dependent on Putin for their energy needs," House Speaker John Boehner said Wednesday on the House floor. "We can supplant Russia's influence, but we won't so long as we have to contend with the Energy Department's achingly slow approval process."

Currently, natural gas cannot be exported without DOE approval. The department has approved permits for several American companies to begin exports, but it takes years to build export terminals, so operations aren't expected to begin until at least 2017.

Energy experts say this time frame and other factors make it highly unlikely that the United States will be able to use its natural gas production - now the world's largest - to defuse the current crisis in Crimea, the southeastern region of Ukraine.

"There are no exports to wield as a (geopolitical) tool yet," says Daniel Yergin, autthor of The Quest: Energy, Security and the Remaking of the Modern World. He says the boom in U.S. production has helped lower natural gas prices in Europe by making global supplies more available, but the first U.S. exports of natural gas are not slated to reach the region until Sept. 2018.

Michael Levi, senior fellow for energy and the environment at the Council on Foreign Relations, a non-partisan think tank, says private companies - not the U.S. government - will decide whom to export to, and it's more profitable now to sell to Asia than Europe. Also, he says Europe's import terminals might not necessarily be able to handle a surge in U.S. exports.

U.S. natural gas production hit a new record last year, spurred largely by the use of hydraulic fracturing or fracking to break apart shale rock and extract gas. Its 2013 level was 10 times higher than that of the late 1930s, according to the Energy Information Administration, DOE's statistical arm.

Also, the fracking-led boom in U.S. oil production has led to record-setting exports of oil-based petroleum products, which include gasoline, diesel, heating oil, jet fuel and propane.

In December, U.S. exports of these products - 4.3 million barrels per day - exceeded the 4 million bpd monthly threshold for the first time, according to EIA data released this week. The 2013 total, up 11% from 2012, was the highest since U.S. record-keeping began in 1920.

Last year, the United States set a record as well for exporting more of these products than it imports. Until mid-2011, its imports had been larger.

"Our consumption of petroleum peaked in 2005, and we have excess refining capacity," says EIA spokesman Jonathan Cogan, noting U.S. refineries are taking advantage of the surge in U.S. oil supplies.

Levi says these exports may benefit the U.S. economy but do not offer geopolitical influence, because they're bought and sold like any other manufactured good.

"It certainly gets people's attention, but I don't see where it adds leverage or reduces U.S. vulnerability," says Levi, author of the 2013 book The Power Surge: Energy, Opportunity and the Battle for America's Future.

Others agree. "There's not a lot you can do with these exports" to exert U.S. political influence, says Alfred Luaces, vice president of oil refinery research at IHS, a research firm. He notes some U.S. exports of petroleum products go to Europe but most leave Gulf Coast refineries en route to Latin America.

Although the Gulf Coast exports more gasoline than it imports, the East Coast continues to import substantial amounts - rendering the United States a net importer of gasoline unlike other petroleum products.